Refunding of bond-like certificates will save MFPD $240,000
August 03, 2005 - The Mehlville Fire Protection District Board of Directors last week agreed to refund bond-like certificates issued five years ago, a move that will save the district more than $240,000 in interest.
The board voted unanimously July 25 to refund $3.61 million in certificates of participation, or COPs, issued in May 2000 to fund the expansion and renovation of the district's No. 5 firehouse and administrative headquarters on Mueller Road.
"We priced the issue today, which is locking in the rates and the savings," Joy Howard of WM Financial Strategies told the board. "We won't be closing the issue until next Monday, but basically the transaction is complete. I'm very happy to advise you that the total savings — and this is net of all expenses — is $241,189.80."
The COPs totaling $3.61 million issued in 2000 were scheduled to mature in 2020. For the first five years since issuance, the district paid between 4.5 to 5.2 percent interest, totaling $1.63 million in interest and $580,000 in principal payments from 2000 to 2005.
For the remaining 15 years, the district was set to pay a fluctuating interest rate that was set to slowly increase from 5.25 to 6 percent, paying an average annual debt service of about $302,000.
The interest of the certificates of participation was projected to cost nearly $2.6 million over the 20 years, which would have brought the total cost of the project to nearly $6.2 million.
The new certificates of participation, which were issued for about $3.29 million, will lock the district into a constant interest rate of 3.63 percent over the remaining 15 years, saving the district nearly a quarter of a million dollars in interest payments and reducing the average annual debt service to about $286,000.
"We are retiring that issue with lower interest rate bonds, just in the same fashion as you would refinance a home loan. It's exactly the same concept," Howard explained at the meeting.
The certificates of participation funded the expansion and renovation of the No. 5 firehouse. Before, the firehouse was a two-story building of about 13,700 square feet that included the fire station on the top floor and the district's administrative office on the lower floor.
In late 1997, the board approved the purchase of lots just south of No. 5 firehouse on Mueller Road for $325,000. The district used that land to build the 27,300 square-foot addition that was funded by the certificates of participation.
The project included two new engine bays, 17 three-bed sleeping quarters, new administrative offices on the upper level for district personnel and garage space on the lower level for vehicle storage. The administrative offices on the lower level were renovated into a training facility and the Fire Prevention Bureau was able to relocate to the administrative building.
When the board approved the certificates of participation, it also authorized a lease/purchase agreement between UMB Bank and the district in which UMB Bank will lease the leased property to the district and the district will make rental payments that will pay for the premium and interest of the certificates of participation.
Bank of America is purchasing the certificates of participation and so will enter the lease/purchase agreement with the district for the leased property.
When the certificates of participation were first issued, Moody's Investors Service assigned the district an A1 rating, which means it has positive investment qualities.
At the board meeting, Howard told board members that the district's certificate rating had been upgraded from an A1 to an Aa3.
"The results of that being, we had a good market going for us, but the change in rating put you into a whole different category of interest rates," Howard said. "It's very complimentary to the district. The rating is based on the general economic condition of the community here, and which obviously you can't control, but it's also based on your finances and your financial management, so they're major elements to the rating process, so it's a compliment to all of you."
Despite the good news, the meeting had a bumpy start after Chairman Aaron Hilmer removed correspondence from the agenda. The board chairman and chief formulate the agenda. The board is not legally required to have correspondence on the agenda.
As secretary, it is Dan Ottoline's responsibility to read the correspondence, which are usually positive letters from residents or community leaders thanking the district.
At the July 18 meeting, Ottoline read two letters that were critical of Hilmer and Treasurer Bonnie Stegman.
At the start of the July 25 meeting, Otto-line asked to add correspondence to the agenda.
"I think it's important that the letters from the citizens are read. What is more important than letters from the citizens?" Otto-line responded.
Hilmer said that Chief Jim Silvernail would read letters from citizens in the future.
"We are not including letters that are full of lies, conjecture, and personal attacks," Hilmer said.
A closed meeting followed the open meeting in which the board unanimously voted to offer employment to two candidates for the position of firefighter/paramedic contingent upon passing a physical.
The board previously had voted unanimously to offer employment to eight candidates who applied for the position of firefighter/paramedic contingent upon passing a physical.
After the examinations are complete, the district will announce the names of the new hires.
Also during the July 25 closed session, the board voted to promote Capt. Dave Waser to the position of deputy chief.
Waser will replace Deputy Chief Anthony Rolfes, whose retirement recently was accepted by the Board of Directors.